All Forum Posts by: Account Closed

Yes i am aware of that FIRPTA; however it is not the biggest bad news for us french investors. Given the current fiscal agreements between both countries we are subject to the maximum french taxation rate on capital gains of 40%

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Hello All,

i just purchased a couple of vacant parcels in California that i plan to build within 3 years.

The plan is to build 2 homes and sell one.

These are the only properties i have in the US, however i own substantial assets in Europe.

I carry the title in my name and have contracted a 1 million $ general liability insurance coverage for each lots for now. Builder's risk policy will be put in motion when the construction will start.

As far as asset protection, do you guys think it is worth transferring the deed into a LLC and take an additional 1 million $ umbrella policy or is it an overkill?

Thanks for the inputs

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Hello All,

i'm about to close 2 parcels i plan to build in the 2 - 3 next years.

I would build as GC / owner builder. Project budget will be about $2,000,000 What do you guys would recommend as tax vehicle for this investment? Does creating a construction entity and another one holding the real estate makes sense?

I don't think i could be requalified as dealer as i do not sell real estate on a regular basis.

Thanks!

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Originally posted by @Bruce Olsen:

@Account Closed Any news you can share from the East LA builders?

We're looking at a few lots and are trying to decide what (if anything) to do with them.

Hi Bruce,

as you know new construction is a tricky business, especially the land development part. Construction costs are to consider but the land itself and the planning are more important. I don't know if you are looking at undeveloped land or developed properties, but it is easier to tear off and build over existing buildings than develop the land from scratch. On my end, i've finally aimed at the architectural high end homes market which is not the typical investment scheme. If you plan on developing land in LA county, you are looking at a 2 years project minimum; if you build over an existing structure, a bit over a year if you already have your plans. The problem with building on developed land is that you need more capital to cover the property acquisition than just raw land. There are many aspects to consider when buying land like parcel legality, deed of easements, road access, fire dpt requirements, geology, soil, slope stability, drainage, sanitation, utilities, zoning, specific ordinances, specific commissions to satisfy etc; you must hire a geologist and an architect or planning expert to make sure your project is feasible before closing. Construction costs themselves vary greatly depending on the nature of your project, the land specifications and how much you want to be involved; they can range from $130 if you act as the builder yourself to $300 per sqft for a single family home

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Originally posted by @Rich Weese:

hi Ron,

I do build for cash. On some occasions in the past I have used private financing at a 9% interest rate and two points. It really didn't add up to that much since I was turning the properties in less than six months. I've sold a couple properties so I have the cash to use on the construction without any financing. It does save a few bucks. In my subdivision in Texas I have been building for under $60 per square foot. That does include fully fenced yards and complete landscaping with sod front and back. Most of the homes I built in Texas were presold and the time from start to finish was 120 days. I only have the one home that has been built and sold here in Florida and it will be close to seven months from start to finish. There were a lot of mistakes and that one took much longer than the second one will take. We should be closer to 90 days on the construction and it is just up for sale now.

Rich

Hello Rich,

I'm impressed by your numbers; here in LA i don't think i could build anything decent for less than $100/sqft; i have to discuss further with new builders i have contacted recently, but i wouldn't be surprised to end up with final costs ranging between 100 and 140 per sqft. Do you build production homes? i would think it is the way to go in this business.

Construction is tricky, because many parameters must be considered as the ideal square footage, number of bedrooms and bathrooms, construction style, etc.. but once you got the right formula for the right area, things get eventually easier.

I don't know how much time the building and safety plan check requires to approve new residential construction plans here, but i wouldn't be surprised if it would take 2 to 3 months. If you add the land acquisition, planning, permitting, construction and sale, we should be near a year in LA county.

Home presales interests me, but i'm not familiar with the process; do you market your homes through your own entity or through a well established local company?

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Hello Rich,

i do not have a fraction of your experience but i've come to the same conclusion you made;
As foreclosures are becoming rarer and selling at above reasonable prices, construction is becoming more and more attractive. It is also i have to admit a much more interesting and sustainable activity than rehab and flips. Construction offers much more development possibilities on the long run. With prices reaching 2006 levels, rehabs and Short sales are nowadays selling at market prices. With many lots offered for sale and new neighborhoods gentrifying and growing in East LA, construction offers rewarding perspectives. I'm familiar with medium scale commercial construction projects (above 20000 sqft), but i'm now considering small residential developments in the 500k's, which is the first time buyers range in LA, in working class areas.

Out of curiosity, do you finance your construction projects? what is your cost per sqft of new construction in your area excluding land? what is your construction schedule from the land acquisition to the effective sale?

Originally posted by @Rich Weese:

Ron,

I pretty much have the final numbers now but don't close for another 10 days. I don't like condos so I don't build them. I build for cash and either don't have enough funds or don't want to use enough funds to build multi family. Those seem much more difficult to me from the initial stages of finding the property, getting it reason owned, completely new floor plans, etc.

I have a licensed general contractor that is very well-known in the area and has a very good reputation. That does not cause any difficulty at all.

Rich

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Originally posted by @Ray Slack:

@Account Closed

I think Allan glass is giving you the best information. While I'm across the country in Miami we have similar costs of construction as LA market. I'm a contractor, developer and real estate investor.. I can build for $80 - $100 per sq ft here in Miami.. that is acting as the G.C. and keeping tight control on all the costs. The typical G.C. markup in Miami is 30% but they don't car about keeping your costs down as the more it costs the more they make.. You really couldn't find a G.C. here to build mid level construction for less than $150 per sq ft.. Most charge $180+ for basic finishes. Also the price per sq ft is only a rough estimate.. If you have a 5000 sq 3/2 duplex it's going to be a lot cheaper than a 5,000 sq ft apartment building with 10 studios. So, you need to look at more than p.p sq ft. Also, if LA contractors are anything like South Florida ones expect them to go over budget by 20-30%. Regardless of what you put in the contract.

thanks for the input; at $180/sqft it couldn't work for the vast majority of La real county real estate since average people expect to buy homes around 500k including land. I'm discussing now with several builders from east LA; i'll let you know what i come up with in the end

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Originally posted by @Ewa Reza:

@Allan Glass has very good points here! These developers do not use general contractors and often they actually are contractors themselves. Often they don't use designer either. Architect for my project will be costing me $20K-$25K for example...

And again @Account Closed your example shows "new" construction on top of existing real estate. Even if they demo 100% of the existing structure (which I doubt) all the utilities are already there / connected. That's probably another $20K in savings (I may be wrong here).

This is actually what i 'm looking into; buying lots with worthless buildings, tear them off and build on top of it production homes. As an investor i don't see the point in building custom homes when you have so many pre designed quality homes on the market offering an infinity of customizations for a much cheaper price and a shorter construction time. You also waste way less time since you deal with a Production builder who know what to do because they have done the same things for hundred times. I'd rather work directly with the builder than with the GC and the architect who are two unnecessary middle men on small construction projects. As for an architect i've never seen the point in hiring one unless i build one day a multimillion dollars property; i've always preferred dealing with engineers and contractors.

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Originally posted by @Allan Glass:

@Account Closed you're off by at least half.

I'm not clear what you consider to be mid class neighborhoods, but for apartments, by this I mean 5+ units, we underwrite hard costs at $135 psf. When you add in permits/fees and soft costs (engineering, arch. etc) we underwrite another $75-$90 psf.

This is assuming flat land and parking on ground level. If you have to go subterranean for your parking you can assume about $25k per spot.

The examples on the MLS you pointed to are 2-4 units which can be done less expensively and are in neighborhoods where more cost effective materials and finishes could be used and still sell. I'd expect all in costs (again SFR and 2-4 not larger apartments) at $135-$150 psf.

Several of my clients who build/sell 50-100 2-4 unit properties a year in the neighborhoods you've given as examples could build at $80-$100 psf only because they use the same architectural drawings have crews on salary and don't bid out via General Contractors and buy materials in bulk and at wholesale trade prices.

The markets we consider Mid Class would be Culver City, Palms, Mar Vista, Silverlake, Echo Park, etc. In those areas we expect all in costs for SFR and 2-4 units at $250 psf.

Best of luck

Hello Allan, Thank you for the feedback, i'm going to contact builders to get exact numbers and will share them.

As investment product, i wouldn't build custom houses anyway, i would built spec type modern sfr ou multifamily buildings using common architectural patterns. To be honest, i don't see much difference in build quality between low income areas and mid class areas like the valley or mar vista. I live in Malibu near the palisades and many apartment buildings here are the same type of build than what you could find in mid city and south central.

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Originally posted by @Ewa Reza:

@Account Closed

with the examples you're showing you're not taking into consideration at least two things...

Some of these properties were build 5 years ago, and some are technically not new construction but sort of like "addition" (new constr. on top of tear down). I'm just starting my new construction adventure and I think I'll be at $185 per SF. But I'm building on a steep slope and that's a big difference.

I heard from my architect that if there was a structure before on the lot the cost can come down to $75 per SF even though.

Hello Ewa,

i probably didn't pick the best examples but look at this one:

http://guests.themls.com/Details/CA/LOS-ANGELES/41...

it was built from scratch; it is a spec home that i have seen few times for low income families; decent quality (compared to what you see around LA) sold for 500k

thus $148/sqft including construction, land, permitting, landscaping, driveway, gate and marketing, overhead and general expenses taxes and fees and their margin. So they must have built for no more than $100/sqft.

I've read that some developers build for $65/sqft in Florida and Texas conventional homes energy efficient with solar panels...

Building on a steep lot is way more expensive indeed because of the grading, excavation and foundation works especially. If you're building a nice custom home on a hillside for 185/sqft, it sounds like a good deal. Does it include land?

I have no experience yet in construction from scratch but i'm watching closely what others do these days and have found several prosperous niche markets

may i ask you more details about your project?

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All Forum Posts by: Account Closed

Account Closed has started 17 posts and replied 75 times.

Post: Which insurance and legal entity for my project?

Post: Which insurance and legal entity for my project?

Post: Best entity / tax strategy for building and selling real estate

Post: new construction costs for apartment buildings in LA county

Post: Buying at foreclosure is EASY!!!!

Post: Buying at foreclosure is EASY!!!!

Post: new construction costs for apartment buildings in LA county

Post: new construction costs for apartment buildings in LA county

Post: new construction costs for apartment buildings in LA county

Post: new construction costs for apartment buildings in LA county